Strait of Hormuz Under Threat: Global Oil and Freight Shipping Face Mounting Risks

The fallout from the U.S. military strikes on Iranian nuclear facilities is rapidly reshaping global trade dynamics. With Iran’s parliament approving a measure to close the Strait of Hormuz, a key transit route for oil and freight, markets and logistics networks are on edge.

Oil Chokepoint in Focus

The Strait of Hormuz—a narrow waterway between Oman and Iran—handles nearly 20% of the world’s oil supply and a significant portion of liquified natural gas exports. Any disruption here has immediate implications for energy prices and shipping.

Iran has long threatened to close the Strait but never acted. That may change. On June 23, Iran’s foreign minister warned that the U.S. bombing of nuclear sites would have “everlasting consequences,” while the supreme leader called Israel’s role in the conflict a “grave mistake” that “must be punished.”

U.S. Secretary of State Marco Rubio pointed out the economic risks, saying on Fox News:

“If they [Iran] do that, it will be another terrible mistake… It’s economic suicide for them.”

Diesel Leads Price Spike

Oil markets reacted quickly but modestly. Brent crude rose 2.44% to $78.89/barrel. West Texas Intermediate followed with a 2.52% gain.

However, ultra-low sulfur diesel (ULSD) surged 3.67%, reaching $2.6352/gallon, the highest since April 2024. Energy Aspects, a market research firm, attributed the strength in diesel to heightened risks to supply chains:

“We see increasing risks to middle distillates supply due to the escalation of the Israel–Iran conflict,” the firm said in a recent report.

The diesel-crude spread hit 75 cents per gallon—its widest in over a year.

Rising Shipping Risks and Freight Rate Surges

Beyond oil, threats to freight shipping are rising across the Arabian Peninsula. The global shipowners’ group Bimco warned of increasing risks from Iranian forces and Houthi rebels. Antiship missiles, drones, and even sea mines are on the table.

Jakob Larsen, Bimco’s Head of Security, advised shipowners:

“Merchant ships in the area should consider reducing their exposure to threats from Iran… and maintain strong vigilance.”

Hapag-Lloyd confirmed its vessels are still transiting the Strait, but added: “Alert level is high, and things might change by the hour.”

Maersk has suspended port calls to Haifa, Israel, citing missile threats.

Logistics disruptions are already visible:

• Freight rates from Shanghai to Jebel Ali surged 55% month-over-month.
• Tanker rates to China and Japan are up 154% and 148%, respectively.
• Marine insurance premiums for the Strait of Hormuz jumped 60%.

Current Outlook

As of June 23, the Strait remains open, but uncertainty is driving fuel price volatility and tighter shipping capacity for said fuel. Shipping executives and global trade analysts are closely watching Iran’s next move.

Source: The Guardian | FreightWaves | CNBC